Apart from the merits of supply-side thinking, by asking now for “dynamic scoring” the Republicans are asking for a convenient change of rules. Until now, proposals for tax cuts had to meet the budget standards under a “static” test. For instance, the GATT legislation that the Congress approved in early December reduces US tariff rates on many imports. Most economists believe that in the long run these reductions may actually increase tariff revenue. Lower tariff rates will mean more trade, and more trade will ultimately mean more revenue. But during the GATT debate the Congress could not fall back on this “dynamic” hope. It had to act on the “static” assumption that GATT would cut federal revenues and therefore increase the US budget deficit. In the end it “solved” this problem by passing a special waiver exempting GATT from the budget rules. The Republicans have not yet proposed a similar waiver for capital-gains tax cuts. Asking for a waiver might be hard to square with their balanced-budget promise, but it would be more honest than the talk of dynamic scoring.
2.
How did we come to this pass, with a president who has no immediate hope of enacting his program and a congressional leadership elected on a plainly unenforceable “contract?” In Washington there are two main hypotheses. One casts Bill Clinton as the villain, now being punished for his own excesses and inattention. The other presents him as the victim of the very forces that helped elect him in 1992.
Elizabeth Drew’s On the Edge is a distillation of the first view. Her first chapter describes the buoyancy with which Clinton assumed his duties on Inauguration Day. She ends the chapter by saying, “But the truth was that as the confident new President took the oath of office, he, his wife, and his staff had no idea how unready they were to govern. Nor did the public.”
The rest of the book is an extensive, chronologically organized elaboration on that theme. Drew is a longtime Washington correspondent, having reported on politics over the last thirty years for The Atlantic Monthly, The New Yorker, and PBS. Her book displays the virtues and defects of reporting from “inside” Washington.
Its analysis, which is often implied rather than stated, closely parallels the Washington talk-show consensus on what is wrong with Clinton. He is indecisive and too eager to please. He paradoxically worked too hard and was too undisciplined, carrying the grad student’s “pull an all-nighter” mentality into the White House. He lost touch with the centrist Democratic constituency that had helped elect him and tried to cram a leftist, big-government health plan down the public’s throat. He was thoughtlessly hostile to the Washington establishment that he would have to work with—yet thoughtlessly willing to accept shopworn liberal ideas. He was too easy on his Arkansas cronies and naive about world affairs—and yet on occasion he could rise to brilliance and win big legislative fights.
There was much that was appealing about him—his brain, his zest, his resilience, his charm—but he didn’t come across as a settled person, and the public seemed to sense that.
Drawing on her conversations with officials and politicians who often cannot be identified by name, Drew provides numerous and mainly plausible details about how and why things went wrong for Clinton. She describes genteel but deadly serious battles between Warren Christopher, the secretary of state, and Anthony Lake, the national security advisor, over who would take the blame for foreign-policy missteps. Each of them, Drew says, feared being set up by the other as the mastermind of Clinton’s vacillating policy toward Bosnia. She says that George Stephanopoulos felt that he had been publicly humiliated when David Gergen was brought in to “save” the administration’s communications effort five months into Bill Clinton’s term. Rival camps grew up around the two men. Drew’s description of their rivalry is artful, since it’s easy to tell that both men were important sources for the book. As with Bob Woodward’s The Agenda and most other insider accounts, the book’s portrayal of people like Gergen and Stephanopoulos—or Lani Guinier, or Les Aspin, all of whom clearly provided Drew with anecdotes—is much kinder and more understanding than its view of those who apparently were not helpful, like Ira Magaziner, the health-reform czar.
The bad side of this approach is that its judgments and analyses are almost entirely about the tactics of power—Bill Clinton made a mistake here, he offended important congressional committee chairmen there, he changed his policy in three different ways. Sections of the book end with the verdict that Clinton had had “another bad week”—a “good week” or “bad week” being the basic unit of measurement on Washington talk shows. On the Edge is more openly analytical than The Agenda, which it otherwise resembles in its behind-the-scenes reportage, and the specific points it makes about Clinton’s inconsistency and other failures of character and policy are usually sound. But Drew muffles most of her judgments in formulations stressing what “many people thought,” as in the following typical sentence:
In late June [1993], the Clinton administration engaged in some international muscle-flexing that left a number of people wondering whether the real purpose was to show that it could flex muscles.
The implication of the book is that Clinton has mostly himself to blame for his troubles, which will be politically fatal unless he can “redefine his presidency” yet again.
Kevin Phillip’s book is not so hopeful. The assumption behind most analyses of Clinton’s problems, including Drew’s, is that the administration must somehow have missed opportunities and forgotten what it used to know. Clinton and the people close to him had seemed so sure-footed when outmaneuvering George Bush. If they had concentrated as hard in office as they did in the campaign, then presumably they could have beaten Bob Dole and Rush Limbaugh as well.
Phillips is hardly interested in appraising the day-by-day strategies of Clinton and his crities. He suggests that Bill Clinton’s early successes and later failures were both symptoms of a deeper political and economic shift. That shift, to characterize it broadly, is the collapse of the capacity of the US economy to sustain growth in jobs and income for the middle class. The “arrogant capital” of Phillips’s title means both Washington, DC, with its lobbyists and warring interest groups, and the financial capital that flows through brokerages and investment banks without creating an adequate base for middle-class employment. As Phillips points out (and as many others, including Secretary of Labor Robert Reich, have argued over the last decade), the very steps that have made US corporations leaner and more “competitive” have reduced the connection between their profitability and the growth of middle-class jobs for American workers. Phillips calls this process the “financialization” of the economy:
Firms once committed to longterm thinking now faced money managers and speculators little concerned about existence beyond the life of a futures contract…. Corporations purged employees, especially older ones close to retirement, cut employee benefits, slashed real wages, and shut down plants in Terre Haute or Muncie…. For the first time in modern US history, stock prices decoupled from the real economy, enabling the Dow-Jones industrial average to keep setting records even as employees’ real wages kept declining. Financialization has only a vague definition, but all of these burdens—the erosion of wages, the agonies of families and communities—go into it.
At first there may seem a huge dose of hypocrisy in the very idea that Kevin Phillips would write a book criticizing the political and journalistic establishment in Washington for its blindness. He lives in Bethesda and has been part of that establishment since the Nixon years. The Washington characters he deplores in this book are people with whom he has had much to do himself. Arrogant Capital is more a jeremiad than a careful expository work, and its examples are mainly quotes and clippings from other people’s research.
With that said, Phillips’s book is still bracing and important, much more right than wrong—and much more useful as a guide to future politics than most Washington analyses. Even in this moment of Republican victory, Phillips argues that both parties have internal contradictions that will keep either of them from satisfying voters for very long:
The Republicans, collectively, are simply not free to admit that serious economic declines—for the middle class and the American dream, in accelerating national indebtedness, and the eroded competitiveness of key industries—occurred during the Reagan-Bush period. Party economic policies are too closely linked to the interests that profited from the recent era’s speculative bubble, tax cuts, bailouts, and trade liberalizations….
The Democrats face the same problems with the reverse set of interest groups. Criticizing the economic policies of the 1980s is easy because their party represents the constituencies that suffered most: minorities, the poor, urban interests, social welfare organizations, labor unions, education groups. But discussing the moral and cultural decline that many Americans feel has taken place since the 1960s is another story.
There is no longer much surprise in the idea that America is being polarized into a richer and better-educated elite, and a less-well-educated, harder-pressed proletariat. Phillips succeeds in making this now-familiar trend seem newly dramatic. For instance, everyone knows that the top 1 percent of Americans increased its share of US wealth and income during the 1980s. But Phillips points out that the bottom half of the top 1 percent—”the $300,000-a-year lawyers, $250,000-a-year suburban orthodontists”—did not significantly increase its share. “Virtually the entire gain went to the top one half of one percent, the families with $4-million to $5-million net worths on up. Their investment capacity exploded.”
The political result of this polarization is a statistic that may seem drearily familiar but has enormous consequences. The US economy as a whole has surged mightily in the last generation, roughly doubling in total output since the early 1970s. But because so much of the growth has gone to the richest Americans, in their roles as officials of or owners of corporations, the median US income has fallen (adjusted for inflation). In 1993 the US economy grew by 3 percent, but the median income of American families fell by 1 percent (as Jason DeParle reported in The New York Times on October 7, 1994). What has been good for America in an abstract statistical sense has been bad for most Americans.
In a paper prepared this fall for the Economic Policy Institute, the polling analyst Ruy Teixeira says that this economic polarization—rather than the genius of Bill Clinton’s campaign—was the main factor in George Bush’s defeat. The economy as a whole was growing throughout 1992, and Bush often wondered why an ungrateful public still demanded “change.” The reason, Teixeira says, is that most Americans were still losing ground. Clinton voters and Perot voters had on average seen their real hourly wages go down over the previous twenty years, and especially in the year before the election. Two years later, the economy as a whole continues to grow—but not the real incomes of most Americans. Now that Clinton is president it is his turn to wonder why an ungrateful population wants change.
Phillips argues that the two main sources of discontent—middle-class economic decline and the perception of cultural collapse—have opposite short-term impacts. Economic distress helps the Democrats; largely cultural issues, such as abortion, school prayer, and immigration, are made much of by the Republicans. But Phillips says that in the long run each trend reinforces the other. People who feel hardpressed economically often express their grievances in other ways. For example, the “angry white men” who voted so strongly against the Democrats in 1994 told pollsters that they were mainly angry about big government, overregulation, the alleged tyranny of political correctness, and other seemingly non-economic issues; but these same angry people had generally suffered economic declines. Indeed, as Ruy Teixeira points out in his paper, the voters who seem angriest, the Perot constituency, differ from other voters in having lost more ground economically in the half dozen years.
Because the fundamental force creating discontent—the erosion of middle-class incomes—has not changed, Phillips says that the Republicans are fooling themselves if they think they’ve created a new, permanent coalition. Today’s politics are volatile and unhappy, he says, more than they are liberal or conservative. Until the polarizing economic trends change, whoever is in charge will displease most of the voters. Phillips ends his book with a list of suggestions for dealing with the change. Most are shifts in the tax code and structure of government to encourage manufacturing investment in the United States, to reduce the rewards of purely speculative and “financialized” activity, to limit the power of lobbyists and interest groups in the capital, and generally to attempt to offset the polarization of incomes among Americans. This plan is not wholly original—Lester Thurow, for one, has made similar points over the last decade—nor is it perfect. It is far more serious than Gingrich’s, but a large question remains whether any of the political leaders we now have could adopt it and sell it to the public.
—December 15, 1994
